Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information for Common Stock
Our Class A common stock has been listed on the NYSE under the symbol “SNAP” since March 2, 2017. Our Class B common stock and Class C common stock are not listed or traded on any stock exchange.
Holders of Record
As of December 31, 2020, there w ere 689 stockholders of record of our Class A common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. The closing price of our Class A common stock on December 31, 2020 was $50.07 per share as reported on the NYSE. As of December 31, 2020, there were 87 stockholders of record of our Class B common stock and two stockholders of record of our Class C common stock.
Dividend Policy
We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. The terms of our Credit Facility also restrict our ability to pay dividends, and we may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our capital stock.
We have paid a stock dividend of our Class A common stock on our capital stock in the past and from time to time in the future may pay special or regular stock dividends in the form of Class A common stock, which per the terms of our certificate of incorporation must be paid equally to all stockholders. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors that our board of directors may deem relevant.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Stock Performance Graph
This performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of Snap Inc. under the Securities Act.
The following graph shows a comparison from March 2, 2017 (the date our Class A common stock commenced trading on the NYSE) through December 31, 2020 of the cumulative total return for our Class A common stock, the Standard & Poor’s 500 Stock Index (S&P 500 Index), and the NYSE Composite. The graph assumes that $100 was invested at the market close on March 2, 2017 in our Class A common stock, the S&P 500 Index, and the NYSE Composite, and data for the S&P 500 Index and the NYSE Composite assumes reinvestment of any dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.
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Item 6. Selected Financial Data.
The consolidated statements of operations data for each of the years ended December 31, 2020, 2019, and 2018 and the consolidated balance sheets data as of December 31, 2020 and 2019 are derived from our audited consolidated financial statements included in “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. The consolidated statements of operations data for the years ended December 31, 2017 and 2016 and the consolidated balance sheets data as of December 31, 2018, 2017, and 2016 are derived from our audited consolidated financial statements, except as otherwise noted, that are not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of our results in any future period. You should read the following selected consolidated financial data together with “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes included in “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes.
Year Ended December 31,
2020
2019
2018
2017
2016
(in thousands, except per share amounts)
Consolidated Statements of Operations Data:
Revenue
$
2,506,626
$
1,715,534
$
1,180,446
$
824,949
$
404,482
Costs and expenses:
Cost of revenue
1,182,505
895,838
798,865
717,462
451,660
Research and development
1,101,561
883,509
772,185
1,534,863
183,676
Sales and marketing
555,468
458,598
400,824
522,605
124,371
General and administrative
529,164
580,917
477,022
1,535,595
165,160
Total costs and expenses
3,368,698
2,818,862
2,448,896
4,310,525
924,867
Operating loss
(862,072
)
(1,103,328
)
(1,268,450
)
(3,485,576
)
(520,385
)
Interest income
18,127
36,042
27,228
21,096
4,654
Interest expense
(97,228
)
(24,994
)
(3,894
)
(3,456
)
(1,424
)
Other income (expense), net
14,988
59,013
(8,248
)
4,528
(4,568
)
Loss before income taxes
(926,185
)
(1,033,267
)
(1,253,364
)
(3,463,408
)
(521,723
)
Income tax benefit (expense)
(18,654
)
(393
)
(2,547
)
18,342
7,080
Net loss
$
(944,839
)
$
(1,033,660
)
$
(1,255,911
)
$
(3,445,066
)
$
(514,643
)
Net loss per share attributable to Class A, Class B, and Class C common stockholders (1) :
Basic
$
(0.65
)
$
(0.75
)
$
(0.97
)
$
(2.95
)
$
(0.64
)
Diluted
$
(0.65
)
$
(0.75
)
$
(0.97
)
$
(2.95
)
$
(0.64
)
(1)
See Note 3 of the notes to our consolidated financial statements included in “Financial Statements and Supplementary Data” for a description of how we compute basic and diluted net loss per share attributable to Class A, Class B, and Class C common stockholders.
December 31,
2020
2019
2018
2017
2016
(in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents, and marketable securities
$
2,537,540
$
2,112,805
$
1,279,063
$
2,043,039
$
987,368
Working capital
2,670,648
2,144,311
1,383,237
2,020,538
1,023,241
Total assets
5,024,238
4,011,924
2,714,106
3,421,566
1,722,792
Total liabilities
2,694,262
1,752,011
403,107
429,239
203,878
Additional paid-in capital
10,200,141
9,205,256
8,220,417
7,634,825
2,728,823
Accumulated deficit
(7,891,542
)
(6,945,930
)
(5,912,578
)
(4,656,667
)
(1,207,862
)
Total stockholders’ equity
2,329,976
2,259,913
2,310,999
2,992,327
1,518,914
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Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use the non-GAAP financial measure of Free Cash Flow, which is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment. We believe Free Cash Flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business and is a key financial indicator used by management. Additionally, we believe that Free Cash Flow is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue generating activities. Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.
We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense, and certain other non-cash or non-recurring items impacting net income (loss) from time to time. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.
We believe that both Free Cash Flow and Adjusted EBITDA provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making. We are presenting the non-GAAP measures of Free Cash Flow and Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures compared to the closest comparable GAAP measure. Some of these limitations are that:
•
Free Cash Flow does not reflect our future contractual commitments;
•
Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets and amortization of acquired intangible assets and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future;
•
Adjusted EBITDA excludes stock-based compensation expense and related payroll tax expense, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and
•
Adjusted EBITDA excludes income tax expense.
The following table presents a reconciliation of Free Cash Flow to net cash used in operating activities, the most comparable GAAP financial measure, for each of the periods presented:
Year Ended December 31,
2020
2019
2018
(in thousands)
Free Cash Flow reconciliation:
Net cash used in operating activities
$
(167,644
)
$
(304,958
)
$
(689,924
)
Less:
Purchases of property and equipment
(57,832
)
(36,478
)
(120,242
)
Free Cash Flow
$
(225,476
)
$
(341,436
)
$
(810,166
)
44
The following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the periods presented:
Year Ended December 31,
2020
2019
2018
(in thousands)
Adjusted EBITDA reconciliation:
Net loss
(944,839
)
(1,033,660
)
(1,255,911
)
Add (deduct):
Interest income
(18,127
)
(36,042
)
(27,228
)
Interest expense
97,228
24,994
3,894
Other (income) expense, net
(14,988
)
(59,013
)
8,248
Income tax (benefit) expense
18,654
393
2,547
Depreciation and amortization
86,744
87,245
91,648
Stock-based compensation expense
770,182
686,013
538,211
Payroll tax expense related to stock-based compensation
50,309
27,840
21,927
Securities class actions legal charges
—
100,000
—
Lease exit charges
—
—
31,143
Reduction in force charges
—
—
9,884
Adjusted EBITDA
$
45,163
$
(202,230
)
$
(575,637
)
Securities class actions legal charges in the fourth quarter of 2019 were related to a preliminary agreement to settle the securities class actions that arose following our IPO in 2017. The preliminary settlement agreement was signed in January 2020 and provided for a resolution of all of the pending claims in the stockholder class actions for $187.5 million. We recorded legal settlement expense, net of amounts directly covered by insurance, of $100.0 million. These charges are non-recurring and not reflective of underlying trends in our business.
We exited various operating leases prior to the end of the contractual lease term, primarily as a result of moving to a centralized corporate office located in Santa Monica, California. In the year ended December 31, 2018, we recorded lease exit charges of $33.0 million. The charges primarily included the present value of our remaining lease obligation on the cease use dates that occurred during the quarter, net of estimated sublease income. As of December 31, 2018, we had exited all properties associated with this event. Changes to our estimated sublease income, including actual contracted sublease income, may result in incremental lease exit charge activity in the period determined. Additionally, we recognized a gain on the sale of buildings sold as a result of moving to our centralized corporate office, which is included in lease exit charges above for the year ended December 31, 2018. These charges are non-recurring and not reflective of underlying trends in our business.
Reduction in force charges in the first quarter of 2018 were related to a reduction in force plan impacting approximately 7% of our global headcount, primarily in engineering and sales. The charges are composed primarily of severance expense and related payroll tax expense. These charges are non-recurring and not reflective of underlying trends in our business. Additionally, we recognized a stock-based compensation forfeiture benefit of $31.5 million, which is included in stock-based compensation expense above for the year ended December 31, 2018.
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